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en-usTechdirt. Stories filed under "securitization"https://ii.techdirt.com/s/t/i/td-88x31.gifhttps://www.techdirt.com/Wed, 25 Aug 2010 10:12:58 PDTTreating Houses Like Copyright... And Then Securitizing And Selling Off The Revenue From Future ResalesMike Masnickhttps://www.techdirt.com/articles/20100823/16432910745.shtml
https://www.techdirt.com/articles/20100823/16432910745.shtmldemand a cut of every future sale of the homes they built. This was similar to various attempts around the globe to add a resale right for artists, such that they get a cut every time their artwork is resold. It makes no sense for artists (and actually does serious harm to artists), and it makes even less sense for houses. But how did the folks who came up with this plan defend it? By citing copyright law, of course, saying that it was no different than an author or a musician getting royalties from the sales of their works.

Reader Mark points us to another article about this attempt to contractually create a resale right for homes. This article has a lot more details about the plans, put together by an financial firm called Freehold Capital Partners (which the last article called a Texas company, but is now referred to as a New York company -- which is interesting, given that the last article also noted that Texas law probably prohibited this practice). However, this article notes that the whole plan is prefaced not on actually giving the builders a cut of all future sales, but (of course) to securitize and sell off the potential future revenues to investors. Forget securitizing mortgages, now we're talking about securitizing a bizarre contractual resale right that means you have to pay some random investors any time you sell certain houses. Yikes.

Thankfully, plenty of folks are realizing how sketchy this is, and various states have specifically outlawed the practice. The article quotes some developers whining about how much nicer it is to be able to get a big chunk of money from these kinds of deals, but given that the chunk of money comes from a rather questionable process, they shouldn't have relied on it too much in the first place.

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]]>ah,-financial-innovationhttps://www.techdirt.com/comment_rss.php?sid=20100823/16432910745Thu, 21 Jan 2010 01:28:32 PSTNo, David Bowie Is Not Responsible For The Financial CrisisMike Masnickhttps://www.techdirt.com/articles/20100119/1134547816.shtml
https://www.techdirt.com/articles/20100119/1134547816.shtmlinnovative efforts by David Bowie to come up with new business models. He's been a huge pioneer in embracing what new technologies allow -- and also new markets and financial opportunities. Of course, most famously, many years ago he "securitized" himself with Bowie Bonds, that allowed him to cash out quickly, while letting others buy into his future earnings. It was actually quite a creatively done idea. But now, ChurchHatesTucker points us to an article by Evan Davis suggesting that David Bowie and his Bowie bonds are at the heart of the financial crisis. This is -- let's just say it -- flat out ridiculous. Financial engineering and all sorts of derivatives were already coming into fashion, and in the unlikely event that Bowie's setup inspired others to securitize mortgages, you can pretty much guarantee that someone else would have come up with the same idea before too long, anyway. Taking a future cash flow and turning it into a security isn't an inherently bad idea, either. It has many good and useful attributes. The problem wasn't securitizing the debt, but using that process (and further engineering) to hide the underlying assets and the true risk associated with the offering. That was not David Bowie's fault by a long shot. It's really too bad that an "economics editor" would confuse the basic concept of securitizing future cash flows with abusing that process to hide actual risk. And dragging David Bowie and his innovations down along with such a confusion doesn't help anyone.